The last battery of mortgage law reforms in Spain will have a limited effect on guarantees for bond issues. This is according to the rating agency, Fitch, who says that the 30-year restriction on mortgages will only apply to new loans and, in the long run, will mean “better and more robust” cover.
The agency stated: “After our discussions with the Ministry of Economy, we believe that this rule will only apply to new mortgages granted, so existing mortgages with maturities longer than 30 years will not be excluded from the eligible loans and thus banks will not be forced to buy back bonds to comply with legal constraints”.
Fitch recognises, however, that the new measures introduced by the Government slightly weakens the creditor protection through the universal personal liability of the debtor, but believes that the number of mortgages that would be eligible to benefit from this relaxation of the rules “is small”, and therefore should have a limited effect on the banks.
El Mundo reported that the agency considers that the impact of the new measures on the desire to return mortgage loans will be limited because the economic incentives to non-payment of housing are lower than the charges the unpaid debt and the need to find alternative housing would represent.
“The disincentive to default on mortgages is strong in the first home, so it will be important to see whether the new laws and procedures will apply only to primary residences or to all mortgage loans,” the agency added.